If you have a debit card, there’s a good chance that you either have already received or will soon get a card that includes a built-in chip. You may also have seen other people using them in checkout lines. The card looks the same as your old card, but it’s typically inserted into a different part of the merchant terminal at the store. The new cards are distinguishable from the old ones based on the presence of a gold square that’s usually placed above the printed card number on the front face. If you’re wondering what the deal might be with those chips, then you’re not alone.
Origins
The chip-enabled technology is called EMV. That acronym stands for the names of the three companies, Europay, Mastercard and Visa, that developed it. The goal behind the change is to achieve greater security by reducing the odds that a criminal can simply swipe a consumer’s card and duplicate its magnetic strip.
The problem with the existing card system is that all the information needed to duplicate the card is embedded in the strip. The data never changes, and it only requires at most one authentication factor, usually a signature or a PIN number. The old magnetic system uses a technology that dates back to the 20th Century and does not implement any modern encryption methods. It is seen by security experts as very easy to compromise, and this creates immense incentives for thieves to attempt to steal or clone card data at the point of sale.
The EMV system also allows greater convenience. For example, it permits contactless processing of purchases. It also allows a card to serve multiple purposes. The older generation of cards could only be authorized to serve as standard credit card from a major issuer or a debit card. The new cards can serve those roles while also permitting access to newer technologies like e-purse functionality. The chipped cards can even be tied to one-time virtual cards for use in online transactions. The newer cards are also designed to take advantage of modern encryption methods, including public-private key cryptography.
How It Works
For the consumer, the process of using the chipped card is very simple. All modern ATMs and merchant terminals are being built with the contactless reader technology built-in. This has the added benefit of reducing physical wear and tear on cards that the swipe system often entailed. Some companies are still using a system that encourages the card holder to swipe the card, but this method does not require the aggressive and direct contact that the old one did.
If you’re dealing with a merchant that does not currently have the chip-enabled technology, there’s no reason to dismay. The old magnetic strip is still there, so your card will remain compatible with the previous system. Simply swipe it liked you always have.
One thing to be aware of is that the newer generation of chipped cards will work more like the current generation of debit cards does. This means that in many more cases than you have in the past, you will be asked to enter a PIN number. You should also be aware that the newer cards do not implement any significant new ways to improve the security of online transactions.
Security
The current approach to producing cards is very easy for criminals to replicate. The new chip technology will require thieves to obtain the right chip and gain access the underlying programming methods in order to implement it. At minimum, this should raise the cost to criminals of engaging in fraud. In a best-case scenario, it may make fraud a criminal enterprise that’s no longer cost-effective.
The Transition
Almost every major bank in the world is currently involved in the process of replacing their magnetic cards with the EMV system. In fact, the United States is fairly far behind the rest of the world in terms of implementation. Many nations in Africa, Asia and Europe began the shift to the chip-based card during the middle of the last decade. Because the implementation entails new liability structures, most of the major card providers started pushing the shift in 2015. The process is expected to be completed on the first day of October 2017. The last systems expected to move over to the EMV technology will be gas pumps. The shift to fully requiring PINs is expected to come in 2020.
When the transition is done, either the merchant or the issuing bank will be responsible for liability on any magnetic cards that are still accepted and used in fraudulent transactions. Consumers do not bear any new liability under the new system. For example, Visa is working hard to remind its users that the company continues to apply a zero-liability policy for cardholders.
Conclusion
It’s a good idea to stay informed about the new technologies that your bank and card issuer are using. If you have concerns, feel free to get in touch with the bank and ask what their transition plan is. The newer system has proven very successful at cutting down crimes committed at the point of sale. It’s also very convenient, and soon it will be only way to do business all over the world.
Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, where you can get personal checks with free shipping.